Declared value is the monetary value a shipper assigns to a shipment when a bill of lading, air waybill, or other shipping document is issued. This value is used to determine the liability or compensation amount in case of shipment loss, damage, or delay. Declaring a value is crucial for ensuring appropriate coverage and is often higher than the actual market value to include potential profits lost due to damage or delay.
In shipping, the declared value of a shipment influences the level of carrier liability and the cost of shipment insurance. When goods are shipped, the declared value must be clearly stated on the shipping documentation. Insurance companies use this value to calculate premiums and carriers to limit their liability. It essentially sets the maximum compensation amount the shipper can claim in case of an incident.
Accurately declaring the value of a shipment is crucial because it directly impacts the insurance coverage and compensation one can receive. Under-declaring the value can result in insufficient coverage and potential financial losses while over-declaring can lead to higher shipping costs due to increased insurance premiums. Accurate declaration helps balance cost against risk, providing shippers peace of mind and financial protection.
Shippers calculate the declared value for insurance based on the invoice cost of the goods, plus any additional expenses incurred up to the point of delivery. This can include shipping costs, taxes, and an additional percentage to cover potential profit or other intangible losses. The specific formula can vary depending on the insurance provider's policies and the nature of the goods being shipped. Market conditions, the sensitivity of the goods to time or environmental factors, and the destination country’s regulations may also affect how value is declared.
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